Cost Overruns: After the final payment, the contractor claimed there were additional costs of $60K.

HI Jewell,If you were to use FHA again, this could trigger the FHA 100 mile rule + 1.75% upfront fee, however with a few exemptions Indeed FHA allows you to put 3.5% down payment to invest in 1-4 units.

Account ClosedEven with high interest rates, lots of folks investing or buying homes do well with FHA loans because of small down payments and good loan terms.

As mentioned elsewhere, breakeven on cash flow is not the same as break even for taxes.Let's make some assumptions:Rental income = $1000Mortgage payment = $400 - but $300 is interest and $100 is principalOther expenses (repairs, advertising, utilities, etc) = $600Depreciation = $250The above scenario creates a break even from a cash flow perspective, however the tax scenario looks like this:Rental income minus the mortgage interest (principal is not deductible) minus the other expenses minus depreciation looks like this:1000-300-600-250 = $150 LossIf your income is over $150,000, then you cannot deduct that loss, but you can roll it over to future years. 

:Will it perform like digital gold?

The limits are not high at first, but they can build with good utilization and payment history.

Then get photos and get third party verification that everything was done right prior to making your final payment to the contractor.

The biggest advantage of using someone local to where you're buying is that they will understand taxes, insurance, and similar items very well when it comes to DTI/DSCR calculations and payment quotes, and they will likely have a local network of service providers for ancillary services (survey, inspections, etc).

I was able to sell the SFR for $62,000 with a wrap around $50,000 mortgage at 12% interest and a pre payment penalty if paid off before 10 years.

Consider FHA loans for lower down payments and reserve for repairs or upgrades.